Letters: Revisit legal system

With reference to “Resolving bad loans” (February 27), the view that more institutions are not a solution should reach the ears of decision-makers in the government and the Reserve Bank of India (RBI). When there are no ideas on concrete solutions, it has become a fashion to call for new institutions or committees. This is the game played out by all intellectuals. RBI Deputy Governor Viral V Acharya was no exception when he declared that two new institutions (a private asset management company and a national asset management company) should be created. No doubt your suggestion to empower bankers is sensible, but more important is strengthening the Indian legal system.

Private sector promoters who have piled up bad assets are pretty sure that the Indian legal system is incapable of harming them. This is evident when we observe that courts have been facing a mountain of stressed assets cases. At best they have been delivering judgments in favour of creditors (read bankers) without a supporting system to implement these judgments. The joke around such judgments is that the horse now declares who is the defaulter and who has the right to recover dues from such a defaulter. This moment of truth is known to both parties from the day of default or, to be more precise, from day one of loan disbursement. The RBI claims that our banking system has not been withered by any serious financial crisis (unlike in the West), but it has become a mute witness for piled up bad assets. Banks have strong documentation against wilful defaulters but they haven’t been able to convert their rights into actions for expediting recovery.

Your suggestion to grant more independence to bankers for selling stressed assets does not sound practical when we consider they do not have the expertise for this. A few banks tried this with the help of asset consultants, who have taken them for a ride by joining hands with promoters.

K V Rao  Bengaluru

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